Angel Broking is bullish on JK Tyre and Industries and has recommended buy rating on the stock with a target of Rs 461 in its September 16, 2014 research report.
"The automotive OEM segment has shown recovery in the last two to three months due to improved consumer sentiment post the election of a stable government at the centre. Passenger vehicles reported a double digit growth in YTD FY2015, while the MHCV segment has also showed positive growth in the last two months. We expect OEM sales to recover in FY2015. Also, the replacement segment is expected to see improvement given better fleet utilization. We expect JK Tyre to report a CAGR of 9% in revenues over FY2014-16 as compared to 5% growth in the FY2012-14 period."
"We expect JK Tyre to report a CAGR of 9% in revenues over FY2014-16E given the improvement in domestic demand, strong export outlook and improvement in Mexican subsidiary Tornel. Further, we expect margin improvement on back of soft rubber prices and operating leverage due to improved capacity utilization. We expect operating profit to grow at a CAGR of 9% over FY2014-16. We initiate coverage on JK Tyre with a Buy recommendation and target price of `461 (based on 6x FY2016E earnings). The target multiple is at a discount of 40% to Apollo Tyres (in line with the historical average)", says Angel Broking research report.
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